The last couple of points that I’d like to tell you about relate to:

• The House, a brief note on how to try and save the house in the event of bankruptcy.
• company directors, secretary’s etc
• gambling & bankruptcy 
• compensation monies being exempt from a claim in bankruptcy
• a brief note on how to try and save the house in the event of bankruptcy
• your credit rating, and where do you go from here.
• being in business while bankrupt
• taxation
• your passport and overseas travel in bankruptcy
• the debt collectors
• buying your way out of bankruptcy, its called annulment.
• the newspaper article
• objecting to the actions of your bankruptcy trustee
• bankruptcy, property, and Family Law
• Insurance
  

The house

I suggest that you contact Alan Nicholls of Nicholls and Co, Chartered Accountants and Bankruptcy Trustees of Tamworth in NSW by phone on 1300 794 492 or email This e-mail address is being protected from spam bots, you need JavaScript enabled to view it if you are concerned about trying to save your house in the event of bankruptcy.  Contact Alan particularly if you are concerned that with the repayments on all of your credit card and other debt, mortgage stress is now also rearing its ugly head. Alan will explain to you how it’s not automatic that you’ll lose your house if you go bankrupt, but that bankruptcy will wipe out enough other debt, so that meeting the mortgage repayments are no longer stressful.

I have had dealings with Alan over the years and am quite comfortable in referring  enquiries about saving the house on to him.  As he pays me rent to have his name on my website, please mention my website as the source of your referral please

Alan says that he can handle bankruptcies with houses situations anywhere in Australia.  In the subject line of your email please type "Saving the house, Fred Appleton" and you will be well looked after. The web site address of Nicholls and Co is http://www.nichollsco.com.au

Give Alan your story, and on the house include the details of the mortgage and what you think is still owed on it, the names on the mortgage and on the title deed, and a current estimate of what you think that in all honesty that the house would sell for today (not in 6 months time, but today). 

On receipt of your email Alan will contact you direct by phone, so also include your telephone number(s) please.

My office won’t become involved until Alan and you have covered whatever can be done, and your decision is to go bankrupt. Allan will ask me or Helen Millward to contact you about getting the paperwork for your bankruptcy prepared.

First of all though, some important information.

A bankruptcy trustee definitely has the right to sell houses caught up in bankruptcy. 

What’s more, the trustee has 6 years left to sell the house after you are discharged from bankruptcy (normally 3 years) if the house hasn’t been sold or otherwise dealt with.  (I’ve been told that this period can be extended but at this stage I don’t know if that’s real or just bravado).  Over time the theory is that it will possibly increase in value so the creditors may be better served to wait for this to happen, if there’s not much equity at the start.

The trustee can (will) also put a caveat on the house to protect the interests of your bankruptcy creditors.

That said, an interesting scenario however has come up in regard to houses, particularly where the house is only worth about what is owed on it, and particularly where it is joint owned, and only one party is going to go bankrupt.  Apparently, in reality, the other joint owner has more say in this than I had known about.

In discussion on the subject of how to save houses with Alan Nicholls, who I have had dealings with from time to time over the years, It seems that saving the house may now be possible under certain circumstances and Alan will tell you about these.

In my dealings with Allan Nicholls we’ve got to the point where he says that would be prepared to reduce his fees if, after looking at your matter, its fairly straight forward (apart from the house)., and after getting more information from you, he feels that the house could be saved, without compromising the rights of creditors and others in bankruptcy, and certain circumstances fall within a particular criteria. 

If he was satisfied in all of this, he would need to be appointed as your bankruptcy trustee.

You would still go bankrupt and my office would still prepare the usual bankruptcy documentation. My fees in this would be the usual $396 per person that you will read about in Bankruptcy Information Note 5.  I also charge Nicholls and Co a fee for having his contact details on my website.

Company Directors etc

This seems to be a bit of an interesting dilemma.

As a bankrupt you can’t hold the position of company director, company secretary or something like that. If you still hold them when you go bankrupt, your bankruptcy trustee will send a form to ASIC saying that you’re bankrupt, and your name will be cancelled from being a holder of these offices.  It doesn’t personally cost you anything if its done that way.

I also think that its then up to the company to advise ASIC of your replacement. If you’re the sole director, then I think that a shareholder can advise ASIC. You may choose not to find a replacement.

However, if you’re the sole director and shareholder, the situation then is that the company has no director, and if nobody else will take on the position, then how can you, as the sole shareholder, advise ASIC of your replacement? Don’t know.

On your bankruptcy any personal guarantees that you gave to company creditors gets cancelled. These personal guarantees become creditors of your bankruptcy, they’re listed as such in the bankruptcy forms.

I think that the company is left sitting there with no director or secretary etc, and your company share, as an asset, is under the control of your bankruptcy trustee.

In that case, isn’t it up to your trustee to advise ASIC of the name of your replacement (who would want to be your replacement anyway?). I don’t think that anybody can be forced to be your replacement.

It seems to me that ASIC or somebody should have the capacity to instruct a solicitor to go to the court and say that here is a company with no directors etc, and to continue trading without a director may be illegal, not to mention trading whilst insolvent, so could the court order the winding up of the company.

I personally think that it is probably the duty of your bankruptcy trustee to take some action here, or give you the authority to do it.

However, who is going to pay the liquidator? From feedback that I get it seems that after a while the company just gets struck off by ASIC.  Whether it’s because there are now no office holders, and ASIC fees aren’t being paid, I don’t know. 

Surely the government should sort this problem out.

If you want to look at winding the company up before you go bankrupt, I can't handle Pty Limited company matters but you could contact Nick Crouch who I’ve mentioned in Information Note 3. Try Nick Crouch at:

Crouch Amirbeaggi
Level 28 St Martins Tower,
31 Market Street, Sydney 2000.
Telephone 02 8262 9333
Email This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Website www.crouch.net.au

Mention my name as the referrer please. I’ve referred people on to Nick for years and I’ve had so many good reports back. I don’t get a commission for any referrals but I charge him for advertising his name on this site.

Generally speaking, with GST debt in a company, if you don’t get the company wound up in time the tax office does get the debt transferred across to the directors. Your personal bankruptcy then cancels this debt.

One thing seems to stick out in practise though is that unless ASIC is properly informed of your resignation as a company director, they will continue to send you the bill for filing fees.

The ASIC website is www.asic.gov.au.

Gambling

Gambling matters associated with bankruptcy are not referred for prosecution where it appears that you had not engaged in any associated criminal activity to finance a gambling habit.

You will not be referred to the DPP unless it involves clear criminality or complex offences, or there seems to be repeat offending despite warnings to the contrary.

Ordinary problem gambling only does not have these characteristics.

An example of clear criminality would be where you had gambled so that your creditors could not get paid.

A complex offence would be for example, where your gambling was tied in with something else like obtaining money by deception or concealing an asset from your creditors.

I’ll send you a bit more on this if you’d care to email me at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it and ask me to.

Compensation

On the question of compensation monies, if you’ve received any, certain monies received in this category, eg. a worker's comp settlement or an asset that can be identified as having been bought with compensation monies, are not counted as an asset that a bankruptcy trustee can sell. However, I’m not sure that this money and this asset are protected from the debt collection process in the ordinary course if you don't go bankrupt.

Your Credit Rating

If you'd like to know what your commercial credit rating looks like, go to Baycorp at www.mycreditfile.com.au then click Personal Information, and then click Order a copy of your own credit file.

You could also write to Credit Reference Association of Australia Limited, PO Box 964 North Sydney NSW 2059. I think if you write it may be free. You should get a response in about two to three weeks after posting this form away.

Going bankrupt or entering into a Debt agreement Proposal doesn’t do you any favours as far as your credit rating is concerned. You won't get a loan in the three years that you are bankrupt, and you must disclose that you are a bankrupt if you apply for credit, or when buying goods and services on credit or paying for them by cheque (presumably a c.o.d. type of arrangement) if the amount is more than $4,370 (indexed).

As I said earlier your credit rating will be badly damaged for 7 years and so you will find it hard, but not necessarily impossible, to get a loan from the banks and finance companies in that time. I'd avoid the less reputable type lenders though. I can give you the name of somebody to contact if you’d care to send me an email asking for it.

By the time people make contact with me, their credit rating’s probably already been damaged anyway by organisations like the banks and credit card and finance companies reporting payment lapses with them. It also reports where you’ve applied for a loan even though you’ve been knocked back, so that puts others on notice anyway.

Your credit rating does wipe the slate clean as far as the commercial credit rating agencies are concerned if you don’t apply for any credit in the 7 years after you go bankrupt.

ITSA will also record your bankruptcy or Debt Agreement Proposal on a permanent database that is accessible by the public, called the National Personal Insolvency Index, known as the NPII. An entry on this index is there for life. However, in February 2007 we had a small breakthrough.  We can now apply in writing for our information not to be entered on this Index if such an entry would jeopardize your safety.

However, if you’re there at the moment, I don’t know how to get the entry removed.

In another context, that makes you worse than a criminal or a drunk driver or child or a wife basher or that sort of person because for a fee, if they knew where to look, the public can access a file and find out if you have ever been bankrupt or have entered into some other arrangement under the protection of bankruptcy law, the umbrella of bankruptcy. However, as a public safety sort of issue, there's nowhere that I know of that you can publicly go to check to find out if your concerns about somebody else are valid, like has your new neighbour been in jail for break and enter?

I suppose that the do gooders would say that it’s a privacy issue and that you can't invade people's privacy like that, however we’re still subjected to early last century attitudes, it’s ok to invade our privacy.

For people like us, people who have had a period of financial stress, well, we're different, we're the sort of person who have possibly lost our job or been ill or have been through a period of relationship difficulties sometime back which has caused us to run into some serious financial strife. We're now the sort of people that the business community and the public need to be warned about and protected from for forever and a day.

In the scheme of things, the big picture so to speak, that’s so so petty isn't it? Still, it's government policy. There's enough of us bankrupts and ex bankrupts out there now, about 25,000 a year, for us to make this a political issue if ever our clout were harnessed.

My advice on all of these restrictions and set backs though is to ignore them, do your time, start afresh, get on with your life. I’ve been doing what I do now for over 10 years so I’ve seen some of my clients get through all this and well and truly get back on their feet again. You could say that I’m example number 1.

If you can, now leave a footprint to show your financial success. After bankruptcy, if you are able to save money, be employed, etc, then leave a footprint showing this happening. In a few years time when you may wish to apply for a loan for a house etc, the bank would see that although there was a problem a few years ago, if it hadn’t happened, they would now ordinarily be inclined to grant you a loan. With housing loans, what’s to stop you applying in your spouse's name?.

From feedback I have heard that provided you’ve got about 25% deposit for a house, and have a job etc to support the loan repayments, then they won’t even check your credit rating. I’ve only heard that once though, but it’s a start.

Some of the individuals that you will find yourself dealing with will act "holier than thou" and say no, how they (and it’s generally not their money, it’s their employer’s) couldn’t possibly lend you anything because you’ve been bankrupt bla bla bla. Others will see you as you now are in your new circumstances, and you’ll get the loan. Shop around, use mortgage brokers where you can.

Give yourself a chance though, leave a record of your success for them to see. I’ve seen people come out of bankruptcy and get a loan, I’ve seen others knocked back.

Being in business while bankrupt.

During the three years of your bankruptcy unless you just trade in your own name only, you must also tell everyone you deal with that you are an undischarged bankrupt if you are in business and trade under a name other than your own.

A practical way around this is imagine you've got a business card. On it, top line, goes your name, Fred Bloggs. On the second line, describe what you do, Coffs Harbour Lawn Mowing Service and Rubbish Removal. Now you're trading in your own name, and that's an advantage because people like to know who they are dealing with, and you then describe what you do.

Another suggestion is the second line of the card may advise who you previously were, so as to identify you to that business. In the Fred Bloggs case the second line would say, (previously Coffs Harbour etc etc etc). To any raised eyebrows or that type of enquiry, simply mutter "taxation reasons" or "divorce settlement" or “accountant suggested it” or something like that. That's generally sufficient, it generally gets an understanding nod.

As a bankrupt though you can’t ask for credit of more than $4,229 or so without disclosing that you are a bankrupt.

Taxation

For business bankruptcies, bankruptcy cancels your tax debt for income tax and GST, whether or not you’ve lodged all of your tax returns at the time of your bankruptcy or not.

The debt is cancelled but you still have to prepare and lodge any outstanding returns. Then, when you get the tax bill, attach a copy of your bankruptcy notice to the bill and send it back to the tax office as though it was a cheque. That should cancel the liability.

For everybody, if it’s income tax then you won’t get a refund during the period of your bankruptcy, as the tax office will keep any refund during that time to offset what you’ve owed them.

The other thing is that if you go bankrupt at any other date than the 30th June, then arrange your taxation and GST returns correctly, and show your taxable income pro rata so that it shows the income, or GST debt up to the date of your bankruptcy, and the balances after the date of your bankruptcy.

The effect of that is that because you owe the pre bankruptcy amount but perhaps don’t know the amount of the debt as at the date of your bankruptcy, then that amount of the debt just becomes a bankruptcy debt, and you don’t have to pay it.

Show the tax office as an unsecured creditor and guess the amount that you may owe them. Show your tax file number or GST number as the reference.

In these circumstances I think that it’s best to go bankrupt at the end of a month so that it is easier to sort out the accounting for this.

For the financial year that you go bankrupt, in this way you only owe the tax on your after the date of your bankruptcy income, or GST matters.

I’ve just come across an interesting, but sad, matter though.  Mrs had some shares when she went bankrupt.  The trustee sold them, and now Mrs, who of course has no money, has been told that she personally has to pay capital gains tax on the profit.  It looks as though Mrs might have to go bankrupt again on the capital gains tax debt, even though she didn’t get any money from the share sale proceeds, because they were sold by her bankruptcy trustee.  Isn’t that wrong, just plain crazy.

Surely the government can change the law to make the bankruptcy trustee pay something, say a flat 10% of the sale price or something.  In that way Australia would get something out of this, which we won’t if Mrs goes bankrupt again over it.  Looks like we bankrupts have been dudded again. 

Your Passport, and Overseas Travel.

You don’t automatically lose your passport when you go bankrupt. If you wish to go overseas (and before you go of course) whilst you are bankrupt, you do have to get your trustee’s written consent before you leave. To my knowledge none of my clients have ever had this permission refused.

You must apply for permission in writing, and give your trustee enough time to consider your application.

The trustee of course will want to know the reason for your travel, where you are going, your departure and return dates, who paid for the trip, an overseas contact address, and they’ll want to check that you don’t owe your bankruptcy any money by way of income contributions etc.

You may be refused permission if you have not been co-operative in your bankruptcy matters.

If you don’t return when you are supposed to then the period of your bankruptcy may be extended.

I’ve known of people being stopped at the airport when they tried to leave Australia without this permission. They were able to go a few days later once the permission matter had been sorted out.

The debt collectors.

How would you like to wake up next to one of them every morning, or to have to look at them across the dinner table at night? I can't imagine that they don't take their attitudes from home to work every morning, and bring them home again at night, can you?

I expect that by the time you've read this far into the information on this web site that you can see that what you've been told by some of them at times can now best be seen as somewhat out of context.

The next 7 paragraphs are also in Bankruptcy Information Note 3, the one about Debt Agreement Proposals. I’ve included them here again in case you didn’t read all of that Information Note.

It seems to me that in many cases the so called debt collectors can be viewed as salesmen selling second hand debts. Have you found that the person harassing you isn’t from the place where you thought that you owed the money to, but they’re from a somewhere that has bought the debt off the organisation that you originally owed the money to?

If this is the case, and sometimes you don’t even know it because they may not have told you, (next time they call, seek this information out) then the person calling you is from an organisation that specialises in buying debts off the original place that you owed the money to. In the industry, your debt is often on-sold on for a very low % of what you owed, say 10 cents in the dollar, maybe a bit more, maybe a bit less.

Now, think about it this way, the person calling you isn’t collecting the debt that you owe, because that’s been paid by the above 10 or 20 cents in the dollar. The place that you owed the money to has been paid. They decided to take less than what you owed, in full and final payment (they wouldn’t take that from you though).

If it was a bank etc who on-sold the debt, and they had previously reported you to a credit rating agency for defaulting, I think that they should now update that record to say that the debt has been “Settled” That might be worth checking. If they are getting away with this then surely the government are a bit remiss here.

The person now ringing you now has a second hand item to sell, not your debt to the bank or whoever, because as far as the bank or whoever is concerned, they accepted something less as full and final payment. The person ringing you now has a second hand item to sell, and their difficulty is that there’s only going to be one possible buyer, you.

It’s like as if the person ringing you was trying to sell a second hand car, and he could only sell it to one person, you. It’s pretty much the same thing, except the government would probably crack down on second hand car salesmen if they treated people that they were trying to sell something to, the way that you know that you are being verbally assaulted and harassed to death.

If you now can see the picture in a different light, don’t you think that that now puts you in a different position, a better negotiating position? The second hand debt salesman might now find that he’s flogging a dead horse. Whilst you still want to pay your debts, but at a rate and over a time frame that you can afford, your repayment offer may now be considered in a different perspective.

In Issue 9 dated August 2001 of the Australian Competition & Consumer Commission magazine called ACCC update, here are some extracts of what it reported about Debt Collectors.

Debt collectors are not supposed to pester or frighten a debtor (you), tell others about the debts, or threaten to take action they aren't legally entitled to take. This all comes under undue harassment, and it is against the law.

People who owe debts should not be harassed at unreasonable hours. After 7.30am and before 9pm is okay, unless you've arranged something else, or unless they've been trying for a while during the day.

Collectors should make their initial contacts at least, outside of someone's work. If a collector needs to communicate with a debtor at work, they should do so discreetly and with care. They should only do this if specifically asked, if an alternative hasn't been provided, or if a debt relates to a debtor's own business. If a collector does contact a debtor at work, they should not let others know about the debt.

Collectors should only call up to three times (that you answer) a week, or 10 a month.

Collectors are not allowed to lie or mislead a debtor about who they are and who they represent; the amount of money owed; what will happen if the debt isn't paid. They should also not use abusive, threatening or obscene language, and they must not threaten violence against you or your property.

The ACCC website is at www.accc.gov.au

Newspaper and magazine articles

I know that this is getting a bit old now, but in the days before you may have offered to pay to get this sort of mention, in 2003 I was approached by the editor of a financial segment of Sydney's Daily Telegraph newspaper. She was researching for a feature article on bankruptcy and having found my website, decided to give me a call. The approach was completely unsolicited and was at arms length.

The tone of the interview started off on the stigma of bankruptcy, out failures etc etc etc. With quite a few years of dealing with people in situations that I broadly classify as household type bankruptcies, we're the sort of people who you probably work with and who possibly live in your street, I was able to give the interviewer a lot of information that's not generally expected or known by the wider community.

The result was what I though was a very fair article. Interestingly, there were only two sources quoted for the information used in the article, the editor acknowledged me by name, and the office of ITSA, the Official Trustee in Bankruptcy. The article concluded with my web site address.

This article was then syndicated throughout Australia. I know that some people later found it on the web.

In 2004 I was also approached by Paul Clitheroe’s Money Magazine and asked if I would contribute to a segment on debt in a coming issue. From memory it appeared in the August issue of that magazine.

Buying your way out of bankruptcy.

Officially this is called Annulment. It works like this. In most cases, once you've gone bankrupt, the creditors hardly ever get anything, due to the fact that there is generally little to be distributed to them from your income in the three years after your bankruptcy, and most bankrupts have nothing for their bankruptcy trustee to sell.

So, if grandma or somebody, not you, is able to come up with an offer to pay them say $10,000 (for example) in full and final settlement of your bankruptcy debt, and enough of the creditors say yes, then your bankruptcy will be annulled, cancelled.

Let me know if this scenario is of interest and we’ll discuss a scenario applicable to you. As a mud map work on say $5,000 as your bankruptcy trustee’s fees, plus say 10c to 20c to your unsecured creditors.

I’ve come across an interesting matter concerning an annulment. When questioned about it, somebody at ITSA told the person to ring their major creditor who had the majority of the debt and therefore voting power, to see if they would agree to the so much in the dollar offer being contemplated.

When called, the major creditor said that the debt had been on-sold, so to ring somebody else at so and so.

The person at so and so said that the debt had been on-sold again, so to ring somebody else again at the new place.

The last person said that they couldn’t find any reference to the debt.

So, in the annulment offer, what will happen? If there’s a creditor there owed say $100 and they’re the only one to vote and say yes, then the bankruptcy could be annulled for about $5,100 with ITSA getting $5,000 of it.

Interesting.

Objecting to actions of your bankruptcy trustee.

If you are in dispute with your bankruptcy trustee there is a procedure under the Bankruptcy Act by which you may ask for a review of certain decisions of your trustee.

I think that this review procedure could be worked overtime if a bankrupt’s income is directed to one of the bank accounts that I referred to in Bankruptcy Information Note 2 under the Supervised Account Regime for the Collection of Income Contributions .

The review is first carried out by Bankruptcy Regulation, an independent branch of Insolvency and Trustee Service Australia, known as ITSA. Under the Bankruptcy Act Bankruptcy Regulation is responsible for monitoring the standards of bankruptcy trustees and debt agreement administrators.

You have 60 days in which to lodge a request for a review of a decision of your trustee or administrator.

Bankruptcy, property, and Family Law

In March 2005 new laws were passed so that previously conflicting bankruptcy law and family law matters relating to property, and I think income, could be sorted out.

I haven’t had any feedback yet on this but in a nutshell, it gives the bankruptcy trustee the right to put his hand up and claim an interest in a bankrupt’s property, or previous property, on behalf of the bankrupt’s creditors, where family law previously seemed to have the upper hand and the creditors missed out.

Insurance

I’ve had people contact me and say that because they are bankrupt they’re having trouble getting insurance. There’s no ordinary commercial reason why that should be the norm, and it isn’t. If you need some insurance then send an email to Tony Brooks at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . Let Tony that you got his details from me please.

Conclusion

I hope that the information that I’ve given you has been of some help, that you now understand your situation a lot better, and that you can now see a way to get out of debt, get back on your feet and so get on with your life.

When you decide what you will do to overcome the problem that you've got, if you'd like some help with the paperwork then the next Bankruptcy Information Note 5,About This Service sets out more about me and how this is all done over the internet all over Australia, and the costs involved.

Also, read the testimonials in Bankruptcy Information Note 6.They’re real, and they’re a representative sample of the sort of things that our clients say. I’d really appreciate it if you’d keep in touch too please, as your feedback could easily be helpful to somebody else.